Tembec reports financial results for its first quarter ended December 29, 2012

Tembec reports financial results for its first quarter ended December 29, 2012 
MONTREAL, Jan. 31, 2013 /CNW Telbec/ - Consolidated sales for the three-month 
period ended December 29, 2012, were $376million, as compared to 
$401million in the comparable period of the prior year. The Company 
generated a net loss of $10million or $0.10 per share in the December 2012 
quarter compared to a net loss of $16million or $0.16 per share in the 
December 2011 quarter. Operating earnings before depreciation, amortization 
and other items (adjusted EBITDA) was $19million for the three-month period 
ended December 29, 2012, as compared to adjusted EBITDA of $12million a year 
ago and adjusted EBITDA of $23million in the prior quarter. 
Business Segment Results 
The Specialty Cellulose Pulp segment generated adjusted EBITDA of $18million 
on sales of $103million for the quarter ended December 29, 2012, compared to 
adjusted EBITDA of $25million on sales of $127million in the prior 
quarter. The $19million decline in pulp sales was due to lower shipments of 
specialty and viscose grades. USdollar and euro prices for specialty grades 
and viscose grades were relatively unchanged quarter over quarter. However, 
with the Canadian dollar weakening by 3.2% versus the euro, Canadian dollar 
equivalent pricing increased by $2million or $39per tonne sold. The 
specialty cellulose market conditions remained favourable. Specialty cellulose 
shipments were equal to 65% of capacity as compared to 84% in the prior 
quarter. The relatively low level of shipments in the December 2012 quarter 
was due in part to the annual maintenance shutdown at the Temiscaming mill, 
which lasted 10 days. Inventories also increased by 4,700tonnes due to 
logistical delays in shipping orders in the latter part of the quarter. Mill 
manufacturing costs increased by $6million due primarily to annual planned 
maintenance at the Temiscaming facility. The balance of the decline in 
adjusted EBITDA relates to the previously noted decline in shipments. 
The Paper segment generated adjusted EBITDA of $6million on sales of 
$78million for the quarter ended December 2012, compared to adjusted EBITDA 
of $14million on sales of $96million in the prior quarter. Lower coated 
bleached board and newsprint shipments caused the $18million decrease in 
sales. In terms of markets, coated bleached board was stable. Newsprint also 
remained stable despite continued weaker NorthAmerican demand statistics. 
The US $ reference prices for coated bleached board declined by US$7per 
short ton while the US$ reference price for newsprint was unchanged. 
Currency was slightly negative as the Canadian dollar averaged US$1.009, a 
0.6% increase from US$1.003 in the prior quarter. Overall, pricing was 
unchanged from the prior quarter. Coated bleached board shipments were equal 
to 86% of capacity as compared to 111% in the prior quarter. The shipment to 
capacity percentage for newsprint was 89%, compared to 103% in the prior 
quarter. The previous quarter shipment levels were not sustainable and a 
reduction in the current quarter was anticipated. As well, the coated bleached 
board mill in Temiscaming incurred six days of planned maintenance downtime in 
the most recent quarter. This in turn increased their manufacturing costs by 
$2million. Mill level costs at the newsprint mill increased by $3million 
due primarily to higher electricity costs. In the prior quarter, the newsprint 
mill had benefited from the very low rates. The balance of the decline in 
adjusted EBITDA was driven by the lower shipments. 
The Forest Products segment generated adjusted EBITDA of $2million on sales 
of $101million for the quarter ended December29, 2012, compared to 
adjusted EBITDA of $8million on sales of $108million in the prior quarter. 
Sales decreased by $7million due primarily to lower shipments of lumber and 
sawmill by-products. Demand for SPF lumber was stable with shipments equal to 
84% of capacity, as compared to 86% in the prior quarter. US$reference 
prices for random lumber increased by US$23 per mbf while stud lumber 
decreased by US$18 per mbf. Currency was slightly negative as the Canadian 
dollar strengthened versus the US dollar. When combined with a lower sales mix 
factor, the net price effect was a decrease in adjusted EBITDA of $1million 
or $5per mbf. During the most recent quarter, several of the sawmills 
experienced planned downtime during the Christmas holiday period, increasing 
costs by approximately $2million. The winter months are also seasonally 
higher cost periods for the sawmills. In total, mill level manufacturing costs 
increased by $5million. 
The Paper Pulp segment generated nil adjusted EBITDA on sales of $117million 
for the quarter ended December 29, 2012, compared to negative adjusted EBITDA 
of $18million on sales of $140million in the prior quarter. The 
$23million decline in sales was due primarily to lower shipments as a result 
of the idling of the Chetwynd high-yield pulp mill that occurred in the prior 
quarter. Market conditions for paper pulp remained relatively weak. The 
benchmark price (delivered China) for Northern Bleached Softwood Kraft (NBSK) 
increased by US$32per tonne while reference prices for bleached eucalyptus 
kraft (BEK) declined by US$8per tonne. Currency was also a slight negative 
as the Canadian dollar strengthened versus the USdollar. Overall, paper pulp 
prices were relatively unchanged, declining by $5per tonne and reducing 
adjusted EBITDA by $1million. Paper pulp shipments were equal to 98% of 
capacity as compared to 91% in the prior quarter. Mill level manufacturing 
costs declined by $11million. In the prior quarter, the Skookumchuck NBSK 
mill had undergone its annual maintenance outage, which lasted seven days. 
Profitability also improved due to the closure of the Chetwynd high-yield pulp 
mill, which generated negative adjusted EBITDA of $5million in the prior 
quarter. In the December 2012 quarter, increasing selling prices led to an 
increase of $2million in the carrying values of finished goods and raw 
material inventories, increasing adjusted EBITDA. This is the opposite of what 
occurred in the prior quarter when declining selling prices had led to a 
$3million decrease in the carrying values of finished goods and raw 
materials. Paper Pulp inventories were at 29days of supply at the end of 
December 2012, as compared to 36days at the end of September2012. 
Assets Held for Sale 
The current period balance sheet classifies the assets and liabilities related 
to the Skookumchuck Northern Bleached Softwood Kraft (NBSK) pulp mill as "held 
for sale". This reclassification is required by IFRS as the Company is 
currently engaged in a formal sales process and expects to sell the facility 
within the twelve-month time frame specified under IFRS rules. 
Outlook 
Overall, the December 2012 quarterly results were in line with expectations. 
The Forest Products segment results declined versus what had been a very 
strong September quarter. The seasonal reduction in stud lumber prices 
combined with planned production curtailments during the holiday period 
reduced adjusted EBITDA. Looking ahead, the normal seasonal increase in prices 
is anticipated in the March quarter. While the recent housing statistics in 
the United States are encouraging, we continue to forecast a slow and gradual 
recovery in housing, with lumber demand and prices following a similar 
pattern. The Specialty Cellulose Pulp segment results were negatively impacted 
by the annual planned maintenance outage at the Temiscaming facility. Market 
conditions for specialty grades were stable while viscose grade prices 
continued to trend downwards. We anticipate a continued stable market for 
specialty grades. However, growth in this market has slowed and the Company's 
plans to increase volumes and reduce viscose grade production are being 
delayed. The Company will continue to maintain a relatively modest exposure of 
30,000to 40,000tonnes per year to the viscose market. The latter market is 
currently under pressure as new capacity is exceeding demand growth. While the 
adjusted EBITDA improvement in the Paper Pulp segment was significant, it was 
coming off a very difficult September quarter, which had included a costly 
annual planned maintenance outage at the Skookumchuck pulp mill. The closure 
of the relatively high cost Chetwynd mill in the prior quarter also had the 
expected positive effect on segment performance. The Company anticipates 
further cost reduction when the new anaerobic plant in Matane becomes fully 
operational. However, paper pulp markets remain relatively weak as evidenced 
by the segment's breakeven results in the most recent quarter. While we have 
seen the implementation of small increment price increases, we expect the 
market for paper pulp to remain challenging in the near term. Paper segment 
results declined as the prior quarter had benefited from very strong shipment 
levels as well as very low energy costs at the newsprint mill in Kapuskasing. 
Looking forward, prices for coated bleached board should be stable while 
newsprint prices may see a small decline. Recently restarted newsprint 
capacity combined with continued declining North American demand will not be 
conducive to improved prices. The Company continues with its capital 
expenditure program, with a strong emphasis on its two specialty cellulose 
mills. The cornerstone of the program is a $190million high-pressure boiler 
and turbine to be installed at the Temiscaming, Quebec, site. The project will 
materially improve the mill's cost structure and margins. A total of 
$78million has been spent on the Temiscaming specialty cellulose project to 
the end of the December 2012 quarter. The project schedule and total estimated 
costs are currently under review. The Company also has several other smaller 
capital projects, which are either in start-up mode or nearing completion. 
These projects will begin to positively impact manufacturing costs and 
adjusted EBITDA in the coming quarters. As noted in the quarterly disclosure 
material, the assets and liabilities of the Skookumchuck, BC, NBSK pulp mill 
have been classified as held for sale. The Company is currently in discussions 
with potential buyers and any future developments will be disclosed as they 
occur. 
Tembec is a manufacturer of forest products - lumber, pulp, paper and 
specialty cellulose - and a global leader in sustainable forest management 
practices. Principal operations are in Canada and France. With annual sales of 
approximately $2 billion, Tembec has 3,700 employees and is listed on the TSX 
(TMB). The full quarterly report, including the interim Management Discussion 
and Analysis, the interim financial statements and the accompanying notes for 
the quarter ended December29,2012, can be obtained on Tembec's website at 
www.tembec.com or on SEDAR at www.sedar.com. 
This press release includes "forward-looking statements" within the meaning of 
securities laws. Such statements relate, without limitation, to the 
Company's or management's objectives, projections, estimates, expectations or 
predictions of the future and can be identified by words such as "may", 
"will", "could", "anticipate", "estimate", "expect" and "project", the 
negative or variations thereof, and expressions of similar nature. 
Forward-looking statements are based on certain assumptions and analyses made 
by the Company in light of its experience, information available to it and its 
perception of future developments. Such statements are subject to a number of 
risks and uncertainties, including, but not limited to, changes in foreign 
exchange rates, product selling prices, raw material and operating costs and 
other factors identified in the Company's periodic filings with securities 
regulatory authorities. Many of these risks are beyond the control of the 
Company and, therefore, may cause actual actions or results to materially 
differ from those expressed or implied herein. The forward-looking statements 
contained herein reflect the Company's expectations as of the date hereof and 
are subject to change after such date. The Company disclaims any intention to 
update or revise any forward-looking statements, whether as a result of new 
information, future events or otherwise, unless required by applicable 
securities legislation. 


                                                             
                                       TEMBEC INC.
                               CONSOLIDATED BALANCE SHEETS
                                                             

(unaudited) (in millions of Canadian dollars)                
                                                                     
                                                  Dec. 29,  Sept. 29,
                                                       2012      2012
                                                                     

ASSETS                                                               
                                                                     

Current assets:                                                      

  Cash and cash equivalents                            $ 56      $ 87

  Restricted cash                                         1         5

  Trade and other receivables                           156       200

  Inventories (note 3)                                  235       255

  Biological assets                                       1         -

  Prepaid expenses                                        3         7

  Assets classified as held for sale (note 4)           141         -
                                                        593       554

Property, plant and equipment (note 5)                  417       485

Biological assets                                         4         4

Other long-term receivables                              11        12

Deferred tax assets                                       2         4
                                                    $ 1,027   $ 1,059
                                                                     

LIABILITIES AND SHAREHOLDERS' EQUITY                                 
                                                                     

Current liabilities:                                                 

  Operating bank loans (note 6)                        $ 69      $ 68

  Trade, other payables and accrued charges             174       230

  Interest payable                                        2        10

  Income tax payable                                      5         3

  Provisions (note 8)                                     2         3

  Current portion of long-term debt (note 7)             16        16

  Liabilities classified as held for sale (note
  4)                                                     32         -
                                                        300       330
                                                                     

Long-term debt (note 7)                                 348       323

Provisions (note 8)                                      16        17

Employee future benefits                                260       285

Other long-term liabilities                               2         2
                                                        926       957

Shareholders' equity:                                                

  Share capital (note 9)                                567       564

  Deficit                                             (463)     (453)

  Accumulated other comprehensive loss                  (3)       (9)
                                                        101       102
                                                    $ 1,027   $ 1,059

The accompanying notes are an integral part of these interim consolidated 
financial statements.
                                                               
                                   TEMBEC INC.
                  CONSOLIDATED STATEMENTS OF NET EARNINGS (LOSS)
                                                               

Quarters ended December 29, 2012 and December 24,
2011                                                           
(unaudited) (in millions of Canadian dollars,
unless otherwise noted)
                                                                      
                                                        Quarters ended
                                                    Dec. 29,  Dec. 24,
                                                         2012     2011

Sales                                                   $ 376    $ 401

Freight and other deductions                               50       53

Lumber export taxes                                         1        2

Cost of sales (excluding depreciation and
amortization)                                             286      316

Selling, general and administrative                        19       18

Share-based compensation (note 9)                           1        -

Depreciation and amortization                              11       12

Other items (note 10)                                       1        2

Operating earnings (loss)                                   7      (2)
                                                                      

Interest, foreign exchange and other                        7       10

Exchange loss (gain) on long-term debt                      4      (2)

Net finance costs (note 11)                                11        8

Loss before income taxes                                  (4)     (10)
                                                                      

Income tax expense (note 12)                                6        6

Net loss                                               $ (10)   $ (16)
                                                                      

Basic and diluted net loss in dollars per share
(note 9)                                             $ (0.10) $ (0.16)
                                                                   
                                  TEMBEC INC.
           CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (LOSS)
                                                                

Quarters ended December 29, 2012 and December 24,
2011                                                            
(unaudited) (in millions of Canadian dollars)
                                                                       
                                                        Quarters ended
                                                     Dec. 29,  Dec. 24,
                                                          2012     2011

Net loss                                                $ (10)   $ (16)
                                                                       

Other comprehensive earnings (loss), net of income
taxes:                                                                 

  Foreign currency translation differences for
  foreign operations                                         6      (5)

Total comprehensive loss                                 $ (4)   $ (21)

The accompanying notes are an integral part of these interim consolidated 
financial statements.
                                                             
                                TEMBEC INC.
         CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                                                          

Quarters ended December
29, 2012 and December 24,
2011                                                      
(unaudited) (in millions
of Canadian dollars)
                                                                       
                                        Quarter ended December 29, 2012
                                    Translation
                             Share   of foreign          Shareholders'
                            capital   operations Deficit         equity

Balance - beginning of
period, September 29,
2012                          $ 564        $ (9) $ (453)          $ 102
                                                          

Net loss for the period           -            -    (10)           (10)

Other comprehensive
earnings, net of income
taxes:                                                                 

  Foreign currency
  translation differences
  for foreign operations          -            6       -              6

Issue of warrants (note
9)                                3            -       -              3
                                                          

Balance - end of period,
December 29, 2012             $ 567        $ (3) $ (463)          $ 101
                                                          
                                                                       
                                        Quarter ended December 24, 2011
                                     Translation
                              Share   of foreign          Shareholders'
                            capital   operations Deficit         equity

Balance - beginning of
period, September 24,
2011                          $ 564          $ 2 $ (333)          $ 233
                                                                       

Net loss for the period           -            -    (16)           (16)

Other comprehensive
earnings (loss), net of
income taxes:                                                          

  Foreign currency
  translation differences
  for foreign operations          -          (5)       -            (5)
                                                                       

Balance - end of period,
December 24, 2011             $ 564        $ (3)  $(349)          $ 212

The accompanying notes are an integral part of these interim consolidated 
financial statements.
                                                                   
                                     TEMBEC INC.
                         CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                

Quarters ended December 29, 2012 and December 24,
2011                                                            
(unaudited) (in millions of Canadian dollars)
                                                                       
                                                        Quarters ended
                                                     Dec. 29,  Dec. 24,
                                                          2012     2011

Cash flows from operating activities:                                  

  Net loss                                              $ (10)   $ (16)

  Adjustments for:                                                     
    Depreciation and amortization                           11       12
    Net finance costs (note 11)                             11        8
    Income tax expense (note 12)                             6        6
    Income tax paid                                        (2)        -
    Excess cash contributions over employee future
    benefits expense                                      (11)     (10)
    Gain on sale of assets (note 10)                       (2)        -
    Other                                                  (4)        2
                                                           (1)        2
                                                                

Changes in non-cash working capital:                                   

  Trade and other receivables                               24       14

  Inventories                                                2     (34)

  Prepaid expenses                                           2        2

  Trade, other payables and accrued charges               (31)     (17)
                                                           (3)     (35)
                                                           (4)     (33)
                                                                

Cash flows from investing activities:                                  

  Disbursements for property, plant and equipment         (40)     (23)

  Proceeds from sale of net assets (note 10)                 2       17

  Other                                                      -      (3)
                                                          (38)      (9)
                                                                

Cash flows from financing activities:                                  

  Change in operating bank loans                             1       42

  Change in restricted cash                                  4      (2)

  Increase in long-term debt                                24        4

  Repayments of long-term debt                             (1)      (3)

  Interest paid                                           (18)     (15)

  Other                                                      -      (1)
                                                            10       25
                                                          (32)     (17)

Foreign exchange gain (loss) on cash and cash
equivalents held in foreign currencies                       1      (3)

Net decrease in cash and cash equivalents                 (31)     (20)
                                                                

Cash and cash equivalents, beginning of period              87       99

Cash and cash equivalents, end of period                  $ 56     $ 79

The accompanying notes are an integral part of these interim consolidated 
financial statements.
                                            TEMBEC INC.
                                BUSINESS SEGMENT INFORMATION

Quarters ended December 29, 2012 and December 24, 2011
(unaudited) (in millions of Canadian dollars)
    

The Company operates an integrated forest products business, which is
managed in four segments. During the December 2012 quarter, the Company
reorganized its internal reporting structure. The High-Yield Pulp
segment was renamed the Paper Pulp segment and now includes the
chemical pulp mill that was previously part of the Specialty Cellulose
and Chemical Pulp segment. The latter was then renamed the Specialty
Cellulose Pulp segment. The Forest Products and the Paper segments were
unaffected by the organizational changes. The segments are:
    --  The Forest Products segment consists primarily of forest and
        sawmills operations, which produce lumber and building
        materials.
    --  The Specialty Cellulose Pulp segment consists primarily of
        manufacturing and marketing activities of specialty cellulose
        including the transformation and sale of resins and pulp
        by-products. A significant portion of chemical products sales
        are related to by-products generated by the two specialty
        cellulose pulp mills.
    --  The Paper Pulp segment includes the manufacturing and marketing
        activities of high-yield pulps and chemical pulps.
    --  The Paper segment consists primarily of production and sales of


    coated bleached board and newsprint. 
Intersegment transfers of wood chips, pulp and other services are
recorded at transfer prices agreed to by the parties, which are
intended to approximate fair market value. The basis of presentation
and the accounting policies used in these business segments are the
same as those described in note 2 and 3 of the Company's audited
consolidated financial statements for the year ended September 29,
2012. Comparative prior period segment information has been restated to
conform with the new segment presentation. 
The performance of each segment is evaluated by management of the
Company against short-term and long-term financial objectives as well
as environmental, safety and other key criteria. The financial
performance is measured based on earnings before interest, income
taxes, depreciation and amortization, and other specific or
non-recurring items (adjusted EBITDA). This measure is included in the
internal reports that are reviewed by senior management. Segment
adjusted EBITDA is used to measure performance as management believes
that such information is the most relevant in evaluating financial
results relative to other entities that operate within similar
businesses. Net finance costs and income tax are not allocated to
operating segments. 
Quarters ended
December 29,
2012 and
December 24,
2011
(unaudited)
(in millions
of Canadian
dollars)                                                                           


                                                   Quarter ended December 29, 2012
                        Specialty
                 Forest Cellulose Paper                 Consolidation
               Products      Pulp  Pulp Paper Corporate   adjustments Consolidated

Sales:                                                                            

  External         $ 85     $ 103 $ 110  $ 78      $  -          $  -        $ 376

  Internal           16         -     7     -         4          (27)            -
                    101       103   117    78         4          (27)          376

Freight and
other
deductions            9         7    23    11         -             -           50

Lumber export
taxes                 1         -     -     -         -             -            1

Cost of sales        86        73    92    58         4          (27)          286

Selling,
general and
administrative        3         5     2     3         6             -           19

Share-based
compensation          -         -     -     -         1             -            1
                                                                       

Earnings
(loss) before
the following
(adjusted
EBITDA):              2        18     -     6       (7)             -           19

  Depreciation
  and
  amortization        2         3     5     1         -             -           11

  Other items
  (note 10)           -         -     -     -         1             -            1
                                                                       

Operating
earnings
(loss)             $  -      $ 15 $ (5)   $ 5     $ (8)          $  -          $ 7

Additions to
property,
plant and
equipment           $ 2      $ 26   $ 5   $ 1      $  -          $  -         $ 34

Total assets      $ 207     $ 426 $ 279 $ 115      $  -          $  -      $ 1,027

Total
liabilities        $ 59     $ 213  $ 67 $ 123     $ 464          $  -        $ 926
                                                                       
                                                                       
                                                   Quarter ended December 24, 2011
                        Specialty
                 Forest Cellulose Paper                 Consolidation
               Products      Pulp  Pulp Paper Corporate   adjustments Consolidated

Sales:                                                                 

  External        $ 100     $ 123  $ 93  $ 85      $  -          $  -        $ 401

  Internal           26         -    10     -         2          (38)            -
                    126       123   103    85         2          (38)          401

Freight and
other                12        10    20    11         -             -           53
deductions

Lumber export
taxes                 2         -     -     -         -             -            2

Cost of sales       118        84    88    62         2          (38)          316

Selling,
general and
administrative        5         4     2     2         5             -           18

Share-based
compensation          -         -     -     -         -             -            -
                                                                       

Earnings
(loss) before
the following
(adjusted
EBITDA):           (11)        25   (7)    10       (5)             -           12

  Depreciation
  and
  amortization        3         2     6     1         -             -           12

  Other items
  (note 10)           2         -     -     -         -             -            2
                                                                       

Operating
earnings                             $
(loss)           $ (16)      $ 23  (13)   $ 9     $ (5)          $  -        $ (2)

Additions to
property,
plant and
equipment           $ 4      $ 12   $ 5   $ 2      $  -          $  -         $ 23

Total assets      $ 256     $ 359 $ 340 $ 121       $ 6          $  -      $ 1,082

Total
liabilities        $ 83     $ 175  $ 69 $ 141     $ 402          $  -        $ 870



Investor Contact: Michel J. Dumas Executive Vice President, Finance and CFO 
Tel: 819 627-4268 E-mail:michel.dumas@tembec.com

Media Contact: Linda Coates Vice President, Human Resources and Corporate 
Affairs Tel.: 416 775-2819 E-mail:linda.coates@tembec.com

SOURCE: TEMBEC

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CO: TEMBEC
ST: Quebec
NI: PAP ECO FIN ERN 

-0- Jan/31/2013 13:21 GMT


 
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